New Zealand REITs

How to Invest in REITs in New Zealand

There are three primary ways to invest in New Zealand REITs:

1. Purchase shares of companies directly on the New Zealand Stock Exchange (NZX) using a broker.
2. Purchase shares of ETFs that hold New Zealand real estate companies.
3. Buy into a fund (hedge fund) that invests in real estate.

How are New Zealand REIT Dividends Taxed at the Shareholder?

In New Zealand dividends received by unit holders from REITs are taxed as regular income at the individual unit holder’s marginal tax rate however if from a “qualifying company” can receive a tax credit.

For example, a shareholder receives a dividend of $1000 from a REIT that is considered a “qualifying company.” The REIT has already paid 30% corporate tax on the dividends, so it attaches a tax credit of $300 (30% of the dividend amount) to the dividend payment.

The shareholder includes the $1,000 dividend in their taxable income, but can also claim the $300 tax credit. This effectively reduces the shareholder’s taxable income by $300, and they would only be taxed on $700 of the dividend income.

If the shareholder’s marginal tax rate is 33%, they would owe $231 in taxes on the dividend income (33% of $700). Without the imputation credit, they would owe $330 in taxes (33% of $1,000). So, the credit reduces the shareholder’s tax liability by $99.

There is no limit on the credit however it only applies to the dividends paid by a qualifying company.

In New Zealand for a REIT to be considered a “qualifying company” and eligible for the imputation credit system it must meet the following conditions:

1. It must be a resident company for tax purposes.
2. It must be widely held, meaning that no one person or group of associated persons owns more than 50% of the voting rights or equity in the company.
3. It must have paid at least 90% of its taxable income in the form of dividends in the relevant tax year.

It’s important to note that not all REITs meet these criteria and therefore not all dividends paid by REITs may be eligible for the imputation credit system.

It is important to check with the REIT and consult a tax professional

REIT ETFs in New Zealand

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